Emerging digital payment tech firms form self-regulatory DATA body

30 July 2013

Leading technology players in the emerging payments and virtual currency industry, such as the Bitcoin Foundation and the Tradehill exchange, are forming a new industry body called the Committee for the Establishment of the Digital Asset Transfer Authority (DATA).

The new group has obviously been created in the wake of the previous security scares at Tradehill, among others, which caused the US Commodity Futures Trading Commission (CFTC) to say earlier this year that it may need to regulate cyber-currency such as Ven, Bitcoin and Ripple. More traditional online operations and online emergent payment operations took a hit later in the year whenLiberty Reserve was charged with a $6bn money laundering scam.

News Analysis: Bitcoin Mainstream These Days The new DATA body says it will seek to promote prudent, responsible development of digital currencies and emergent payment forms in future. It will set up common rules to protect customers and work as a liaison between businesses, customers and regulators, but of course Bitcoin and many other initiatives were founded to deliberately avoid being co-opted into the financial services regulated arena. The formation of the new self-regulatory body shows how far it has travelled into the mainstream.

When fully established, hopefully by the end of this summer, DATA also intends to provide its members with technical standards and best practice guidelines intended to prevent money laundering and security concerns in the future, ensuring compliance with all applicable laws.

Founding members of the Committee include Stan Stalnaker, chief executive officer (CEO) of Hub Culture (Ven); Charlie Shrem, CEO of BitInstant and Vice Chairman of the Bitcoin Foundation; and Tony Gallippi, CEO of BitPay among others (see below for full list of founder members).

Enforcing AML Standards DATA will develop programmes to oversee member compliance with its standards and accountability procedures for non-compliant organisations in the digital currency and emerging payments space, alongside its regulatory liaison and lobbying activities. DATA members will need to obtain licenses and registrations to benefit from its work and help establish its proposed new standards. An immediate priority will be developing anti-money laundering (AML) compliance norms to battle the continual accusation that online currency is often used by criminals.

“The virtual currency community must address a number of important regulatory and public policy challenges before virtual currencies can find broad acceptance,” said Adam Shapiro, a director with the Promontory Financial Group. “These [DATA] companies are taking an important first step toward addressing these challenges in cooperating with regulatory authorities.”

According to Jon Matonis, executive director of the Bitcoin Foundation: “Self-regulatory organisations are excellent non-governmental solutions for industry best practices and the Bitcoin Foundation supports inclusive efforts to improve the quality of businesses engaged in exchanging Bitcoin.”

As Dax Hansen, a leading payments attorney who represents cutting-edge tech start-ups, admitted digital currencies are revolutionising payments through technological innovations, but they also are drawing intense regulatory scrutiny as regulators and lawmakers grapple with them. “Industry best practices and standards will contribute to productive dialogues as these innovative payment systems roll out,” he added.

Other founding members of the Committee to Establish the Digital Asset Transfer Authority include:

“For new payment technologies such as Bitcoin, Ripple, Ven and other digital currencies to realise their full potential, making commerce cheaper and easier around the world, customers and DATAuthority.org merchants will need to have trust in the integrity of the companies in the ecosystem,” explained Jeremy Liew, a partner at Lightspeed Venture Partners, when discussing the rationale behind the new trade body. “This trust comes from an association, with trustworthy investors, trustworthy institutions, and confidence that these technologies - and the companies that provide them - share a commitment to fair, responsible and prudent business practices.”

DATA welcomes inquiries from other firms that want to join and share its commitment to the responsible evolution of new digital currencies and payment technologies. An open statement by the Committee for the Establishment of the Digital Asset Transfer Authority is available online or those interested can follow the new body at @DATAuthority.

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